Aim the London Stock Exchange's junior market for small companies, formerly known as the Alternative Investment Market was launched on 19 June 1995 and has been widely hailed as a success. Since its inception, when it had just ten companies, more than 3,580 firms have floated on it.
It currently boasts 1,100 firms worth a total of nearly £73bn. Despite ongoing criticism of its "light-touch" regulation and corporate governance problems, Aim has outlasted domestic and international rivals who grappled with similar issues.
Launched in 2005, the UK's Plus Market wound down in 2012 following financial problems and was bought by Icap. Foreign competitors, including Germany's answer to the Nasdaq, the Neuer Markt, and France's Deuxime Marche, have also disappeared.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
However, Aim's overall long-term performance has been poor, says Hardeep Tawakley in Investment Week. In the past two decades, the FTSE Aim All-Share index has fallen by around a fifth, while the blue-chip FTSE 100 has doubled. Within this headline figure, there has been great variety, thanks to small caps' volatility and unpredictability.
Notable successes include Asos, an online retailer than rose by a factor of 29 between 2008 and 2014, and Domino's Pizza, which has quadrupled in five years. But there have also been plenty of disasters, such as the high-profile flame-out in insurance IT specialist Quindell last year. Its shares have collapsed by 75% following attacks by short-sellers and controversy over share dealings by its former management.
Still, the lure of Aim hasn't been solely about growth stocks the market also offers attractive tax breaks. Holdings of qualifying Aim-listed stocks are exempt from inheritance tax once owned for two years, meaning that Aim portfolios are often used for inheritance-tax planning. Stamp duty on Aim trades was recently abolished, while shares can now be held in an Isa following a change in the law in 2013.
So what next for Aim? This year has seen the index retreat, amid uncertainty over the result of the general election. But there has been a flurry of new flotations since May, while a robust economy is typically a benign environment for small caps. Still, Aim's many burnouts are a reminder that it is "a market for stockpickers", says Tawakley. One fund with a good record is the Marlborough UK Micro Cap fund, run by Giles Hargreave.
-
Stop inheritance tax perk on pensions, says IFSThe government could raise billions of pounds in revenue by closing inheritance tax loopholes, such as on pensions and AIM shares. Is your pension at risk?
-
Revealed: Best buy-to-let property hotspots in the UKLooking for the best buy-to-let property locations in the UK? We reveal the top 10 postcodes with the strongest rental returns
-
Somero: trading this overlooked bargainFeatures Mechanical-screed maker Somero dominates its niche and is attractively valued. Matthew Partridge picks the best way to trade it.
-
How to find big profits in small companiesCover Story The small- and micro-cap sectors are risky and volatile. But with careful research and patience, investors could make huge gains. Matthew Partridge explains how to find the market’s top tiddlers.
-
The hidden gems on Aim, London's junior marketFeatures Aim, London’s junior market, is risky – but you can find solid stocks at low prices. Scott Longley reports.
-
Is Aim finally coming of age?Features The Aim market of mostly smaller companies has traditionally been seen as a bit of a backwater. Is it time to change that view? Matthew Partridge talks to Paul Latham and Richard Power of fund management company Octopus.
-
Fetch! The Chinese small-cap stocks to buy in the Year of the DogOpinion Each week, a professional investor tells us where she’d put her money. This week: Tiffany Hsiao of Matthews Asia selects three Chinese small-cap stocks with exciting potential.
-
Small and mid-cap stocks with big potential
Opinion Professional investor Guy Anderson of the Mercantile Investment Trust selects three small and medium-sized firms with promising prospects that the market has missed.
-
Get cheap, reliable growth from smaller companiesFeatures One of the most reliable long-term investment trends is the long-term outperformance of smaller companies over blue chips. Max King picks some of the best ways to buy into this growth.
-
Big gains from small caps
Features In an environment of middling inflation and low interest rates, small-cap stocks tend to beat big blue-chips. John Stepek explains why, and how to invest in them.
